My interview with Senator Leahy as Keith just mentions, and Senator Leahy‘s call to investigate the Bush administration is coming up in just a moment.

And on a day when President Obama got a wildly positive reception on the road, selling his stimulus plan, his treasury secretary was all but pelted with tomatoes when he unveiled the plan to further bailout the nation‘s banks. We will have more on that with Senator Jon Tester, the only man with a flat top in the entire United States Senate. Former President Jimmy Carter will also be here live this hour as well.

And—we are doing a RACHEL MADDOW SHOW melodramatic re-enactment of a court case in San Francisco. I apologize in advance. That is all coming up this hour.

But, first, the Obama administration knew that it would be coming into office facing two wars in progress, a massive, massive financial crisis, $1 trillion deficit and all of the other stuff that got worse or did not get fixed during the previous administration. That‘s what the presidential campaign was all about.

What they seemingly did not expect was the insistence and proliferation of calls to investigate and to prosecute, if necessary, officials from the previous administration who may have committed crimes while in office. It seems clear that this is not how the Obama administration expected to be spending their first term but it also seems clear that this is an issue that is not going away. And the calls are getting more insistent, not less, as time goes by. And the calls are coming from political players who are the kind of people a president might find hard to ignore, the chair of the Senate Judiciary Committee, say.

Last night, at his first press conference, the president was asked to respond to a new proposal from Senate Judiciary chairman, Patrick Leahy, a proposal that a truth commission be convened to investigate the Bush era. Chairman Leahy had said at a speech at Georgetown, quote, “The straightforward mission would be to find the truth. People would be told to come forward and share their knowledge and experiences—not for the purposes of constructing criminal indictments but to assemble the in facts. Such a process could involve authority to obtain immunity from prosecutions.”

Well, now that Senator Obama—excuse me, President Obama has said that he will look into Senator Leahy‘s proposal, there‘s a really important question about this proposal that needs answering. Is Senator Leahy trying to help out the Obama administration here, which does not seem necessarily inclined toward prosecuting Bush administration officials? Is this a way to take prosecutions off the table but doing it in a way that will shush the insistent, persistent claims that prosecutions ought to be pursued?

Or—is Senator Leahy proposing something that actually would clear the way for potential prosecutions by saying that the last and only get-out-of-jail-free card for Bush officials will be for them to tell the whole truth and nothing but the truth to this commission? Anyone refusing would be fair criminal investigation game.

I spoke with Senator Leahy earlier today about his proposal, and his answers to my questions may surprise you.

(BEGIN VIDEO CLIP)

SEN. PATRICK LEAHY, (D) JUDICIARY COMMITTEE CHAIRMAN: You‘re going to have people, some people will say, “Let‘s go ahead and prosecute everybody.” That can take 10 or 15 years. Others want to ignore everything—I don‘t agree with that. But this might be a middle ground where we could at least find out what happened.

When I first came to the Senate, Frank Church had just had a commission like that, looked into the spying on anti-war protesters, some of the abuses of both the FBI and CIA, and just bringing the matters to light and brought about some much needed reforms and changes that lasted for a couple decades. I think we have to do the same thing here, because there were abuses of the law. There were things done that America should not be doing, and let‘s find out about it.

MADDOW: What if a truth commission did a thorough investigation of the type that you‘re describing and they found that, in fact, horrible crimes were committed? If there wouldn‘t be prosecution, how would say—how would saying, “Well, now we know,” and they all legally got away with it—how would that stop these things from happening again?

LEAHY: I think the fact that because it‘s very, very public, and the

way they find out about it, it makes it very clear to the next person—

you try the same thing, you are going to be found out, and you are going to

be prosecuted. You are also going to have some people that will refuse to

perhaps refuse to testify, even though offered immunity. But with the evidence gathered from the others, they can be prosecuted. And, of course, anybody can be prosecuted for perjury.

It‘s not—I‘m a former prosecutor—it‘s not a perfect way of doing it, but it may be the only way to get the truth out. And I think that the only way you‘re going to stop a future administration from being tempted to do some of the same things if the truth has come out. It‘s already been done on the torture issue with some of the military commissions when immunity has been granted. The House has already granted immunity, House of Representatives‘ immunity to each—to a couple of witnesses.

And you either grant enough immunity to get the truth out or you don‘t get it at all, because otherwise, you are just going to have constant stonewalling.

MADDOW: Just to be clear, you would suggest that you would offer immunity in exchange for prosecution—in exchange for testifying if need be, immunity from prosecution. But if people still elected to not testify, that immunity, obviously, would not apply to them .

LEAHY: Yes.

MADDOW: . and there could be—they could be subject to criminal investigation and prosecution?

LEAHY: That‘s right. The only way they would have immunity would be if they testified and testified thoroughly. Because they would be asked under oath, “Have you given us all of the information?” You withhold, that‘s perjury, and you‘d be prosecuted for that.

MADDOW: During his confirmation hearings, some Republicans tried to get now Attorney General Eric Holder to promise that he would not prosecute Bush administration officials. I wonder if you had any discussions about your middle ground truth commission proposal with your Republican colleagues, if you had any reaction to them.

LEAHY: Well, I tried to tell them. They say, “Oh, it‘d be terrible to investigate a former president‘s administration. We would never do that.” I said, “You spent six years doing that to the Clinton administration. You had thousands of hours, spent tens of millions, perhaps hundreds of millions of dollars, investigating then former President Clinton.”

This makes about as much sense as those who say, “Oh, you know, we voted to get us into this economic mess, and we can‘t vote to get us out of this economic mess.” If I was --- if I was a cynic, I would say it was hypocritical. But being a kind, benevolent person, I say it‘s just—they‘re being forgetful.

(LAUGHTER)

MADDOW: The speaker of the House, Nancy Pelosi, and the House Judiciary chairman, John Conyers, have made comments on these—on the same strategic considerations that you are considering with this truth commission proposal. Nancy Pelosi has said that she‘s open to the idea of investigations, possibly prosecutions if necessary. Judiciary Chairman John Conyers in the House says he does want an independent criminal probe.

Do you see the three of you as sort of being on the same page here, maybe differences of degree of focus, differences of emphasis—or do you actually think there are disagreements between your proposals?

LEAHY: No, I think we have all the same goal and that is to find out what happened—maybe use different methods to do it but let‘s find out what happened. Again, I use the example of what Senator Frank Church did when he found out they had—the FBI and CIA investigating people whose only crime was protesting the war in Vietnam.

Now, we saw some touches of this hearing I held with former Secretary of Defense Rumsfeld. The press accounts had been—they sent out camera crews to record people protesting. They found Quakers who protested the war. I said, “News flash, Quakers always protest war.” You sent a crew to find war protesters in Vermont, I said, you could have saved money. I was protesting the war on the Senate floor, you just turn on CSPAN.

MADDOW: I conducted that interview with Senator Leahy earlier this afternoon and I have since spent the rest of the day trying to put his answers in context. As far as I can tell, we now got the chairman of the Senate Judiciary Committee proposing that any Bush administration official who wouldn‘t testify and tell the truth commission the whole truth about potential Bush-era crimes, those officials should be considered fair game for criminal investigation and prosecution if the facts warrant.

We‘ve also got the House Judiciary chairman, John Conyers, who has called for an independent criminal investigation into the Bush administration‘s detention and interrogation and surveillance policies. We‘ve got the speaker of the House, Nancy Pelosi, who said last month that she supports investigation of potential Bush-era crimes and prosecutions if the facts so dictate. We‘ve got Rhode Island senator, Sheldon Whitehouse, a former federal prosecutor, saying that Congress has an independent responsibility to investigate alleged crimes by Bush-era officials and he said he intends to discharge that responsibility.

We‘ve got news that Senate Majority Leader Harry Reid has said that he would support funding for additional inquiries into Bush-era activities by Senate committees. We‘ve got senators Barbara Boxer and Carl Levin, who each voiced support on this very TV show for investigations of Bush-era potential crimes. As did Senator Russ Feingold of Wisconsin, who said Congress‘ responsibility to investigate the Bush administration is, as Senator Whitehouse said, independent of whatever the administration decides to do about this subject.

All of this from Congress even as the new attorney general, Eric Holder, refuses to rule out the possibility of prosecutions.

I think that what we have stumbled into here is an unexpected but rather blatant emerging consensus among powerful Democrats in Washington that alleged Bush-era crimes should be investigated and if need be, prosecuted. Do they mean it? Are they blowing smoke? Is this just designed to make everyone shut up about prosecutions because the Obama administration doesn‘t want to deal with this right now?

Well, over to you, Mr. President. Over to you, Mr. Attorney General. Over to you, congressional leadership. And—well, over to you, concerned, inconvenienced citizen.

(COMMERCIAL BREAK)

MADDOW: Time now for another installment of our ongoing tragic comic chronicle of the Republicans search for meaning in the minority, “The GOP in Exile.”

(MUSIC)

MADDOW: It does not get much more poignant for the minority party than this. This is the Republican governor of Florida, successor to Jeb Bush, former Republican V.P. hopeful and potential future Republican presidential candidate, Charlie Crist, hugging President Obama in Fort Myers today—which is nice, it‘s nice. And it is the friendliest possible path back to Republican relevance. If you can‘t beat them, I‘ve always said, hug ‘em.

(COMMERCIAL BREAK)

MADDOW: Imagine having the treasury secretary‘s job right now. Your job basically is to tell Americans that hundreds of billions of more taxpayer dollars have to go to Wall Street after hundreds of billions of dollars have already gone to Wall Street, which has had the observable effect of the economy continuing to swirl around the toilette bowl, making a horrible, gurgling noise.

There are two huge things the government is doing so far to try to fix the economy—the bailout and the stimulus. If you‘re a Democratic politician, the stimulus is, frankly, way more fun. It is a happy accident of Keynesian economics that the most technically, economically effective things to spend money on as stimulus happen to be things that constituents tend to like—stuff like building schools and fixing broken stuff and funding teachers and cops, et cetera—which might explain why the White House has taken big, overt steps to get the American people to associate the stimulus plan with the president himself.

Look at the reception he got today at his stimulus plan town hall in Fort Myers, Florida. This is a county he lost by 11 points. The president took questions—and check this out, this was the reaction he got when he announced he only had time for one more question.

(BEGIN VIDEO CLIP)

PRES. BARACK OBAMA, UNITED STATES OF AMERICA: OK, I‘ve only got time for one more question. I feel bad about it.

It‘s got to be a guy. So women, you got to all sit down. Women, you got to all sit down. It‘s got to be a man.

(INAUDIBLE)

OBAMA: All right?

(END VIDEO CLIP)

MADDOW: Look at that, it‘s like “The Price is Right.” For all of the Republicans‘ efforts to make it seem—the stimulus seem like a bad thing, for all of the imperfections of the stimulus plan, President Obama has taken ownership of the stimulus. He wants you to associate it with him.

Now, the other thing the government is doing to address the economic crisis is the bailout. And the Wall Street bailout is not something the president is eager to succeed himself with. He sort of said last night, “Tim, you can take that, right?”

Last night at his press conference, the president was asked to address the bailout specifically, and his response was in essence, “Thanks, but no thanks.”

(BEGIN VIDEO CLIP, LAST NIGHT)

OBAMA: My immediate task is making sure that the second half of that money, $350 billion, is spent properly. I don‘t want to preempt my secretary of the treasury. He‘s going to be laying out these principles in great detail tomorrow.

(END VIDEO CLIP)

MADDOW: I don‘t want to preempt my secretary of the treasury. Yes, I wouldn‘t want to either.

Today, Secretary Geithner dutifully unveiled the new plan to overhaul the bailout. And honestly, the announcement was sort of disastrously received. When he began speaking at about 11:00 this morning, the market was feeling sort of optimistic. By day‘s end, the market plunged 382 points.

The “L.A. Times” ran with this headline, quote, “Wall Street to Geithner: Where are the details, man?” The IMF‘s former chief economist told “Talking Points Memo,” quote, “This is not a plan.” The headline on Bloomberg: “Skepticism over Bank Rescue.”

If the question is whether the rest of the bailout under Obama will be more effective and less offensive than the bailout that took place under Bush—well, from the “New York Times” today, quote, “Mr. Geithner successfully fought against more severe limits on executive pay for companies receiving government aid. The administration will not dictate to the banks how they should spend the billions of dollars in new government money. The plan largely repeats the Bush administration‘s approach of deferring to many of the same companies and executives who had peddled risky loans and investments at the heart of the crisis.”

So, yes, given that that‘s what they announced, my stock market is down on this news as well. To be fair, there are some things that are different from the Bush administration‘s bailout approach. For instance, new transparency measures—neat. Secretary Geithner even announced a new government Web site where we, the people, can track our investments—double neat.

But overall, today‘s announcement was sort of disastrously received. The question is: Was that inevitable? Is this a policy that is so politically toxic that this plan is the best we could have expected? Or should we not reflectively hate this? Is the policy getting better since the Bush era?

It‘s time for a talking down here. Joining us now to try is Democratic Senator Jon Tester of Montana. He is a member of the Senate Banking Committee. He questioned Treasury Secretary Geithner earlier today.

MADDOW: First of all, I know you were a big supporter of the stimulus bill. So, congratulations to you on that legislation passing the Senate today. I have to ask you if you expect to see big changes in the conference committee before the president signs it?

TESTER: Well, I really don‘t. And I really look at it as a jobs bill, Rachel. I think that, you know, when you have the unemployment rates like we‘ve had over the last three months, we needed something to really put people back to work. I think this bill does that.

I think it‘s a nice mix, and I think it really rebuilds our infrastructure from the ground up, plus, puts in some tax credit and puts in some other things like unemployment compensation and Pell Grants that I think are critically important. I think it‘s a good bill overall. And I‘m happy the Senate passed it. Actually, it just amounts to whether you want to put people to work or you want to play politics. And in the Senate, we decided to put people to work.

MADDOW: In terms of trying to come up with the best possible stimulus policy, could your home state of Montana create even more jobs if there was more infrastructure funding from the government? Do you think there‘s a chance of further infrastructure investments?

TESTER: You know, I was just talking to the Department of Transportation director today and there is no doubt about that. Whether you talk about highways and bridges or water systems or electrical transmission, electrical generation, mine cleanup, well plugging—I mean, the list goes on and on and on. And those are projects that can be done almost immediately. I mean, within three months.

MADDOW: On the bailout, sir, you were against giving the president the second half of the TARP money. Were you happy with what you heard from the treasury secretary today about how this administration will do the bailout differently?

TESTER: Well, I think the fact that there‘s going to be some accountability and some transparency and some oversight is a big step. I mean, remember when Secretary Paulson came in with three pages and said, “I want $750 billion or the economy is going to meltdown”—I mean, we heard this before on the Iraq war and the Patriot Act and military commissions.

The truth is, is that, I think, Secretary Geithner is approaching this with a little more thought and certainly, more information that needs to be out there? Absolutely. But at least he‘s planning for future, and transparency and accountability is huge, and I think that‘s going to be a big part of how they spend the next money.

MADDOW: I know, in the banking committee today, you asked the treasury secretary specifically about bank consolidation being one of the results of the billions that have already been handed out to these financial institutions. Why did you ask about that and how satisfied were you with his response?

TESTER: Well, I think choice in the marketplace is critically important, and competition in the marketplace is critically important. And when you take taxpayer dollars and let banks use them to buy out their competition, that takes away customer choice and that doesn‘t appeal to me much. I think the whole idea behind the bank bailout that, as you correctly pointed out, that I didn‘t support, was to free up the credit market and put liquidity in the credit market. Some would argue it‘s done that, some would argue that it hasn‘t done that.

But the truth is, is that, I think, that we need to do a better job. I think Secretary Geithner knows we need to do a better job, and this next $350 billion, we‘ve got to get more bang for the buck than we did for the first 350, that‘s for sure.

MADDOW: All right. One last sort of, I guess, bigger-picture question about this bailout. I wonder if you think that the public antipathy for this bailout—I said at the top of the show that Treasury Secretary Geithner almost got hit with tomatoes today at this rollout. It‘s so unpopular. Do you think that the public‘s hatred for this bailout is a fundamental sign that we shouldn‘t be doing it, or are you convinced this is necessary, it just needs to be done better and explained better?

TESTER: Oh, it‘s got to be done better and we got to make sure it gets down to Main Street, down to working families. I can tell you that people aren‘t happy about it because they see—the people who created the problem is getting the benefits from the bailout. And we have to make sure that they don‘t get the benefits of the bailout, that, in fact, the golden parachutes don‘t happen, excessive executive compensation doesn‘t happen. And we also need to make sure that the money actually does get down and free up credit liquidity.

We need to also—I mean, the list goes on and on and on. I mean, we need to bring in the community banks and make sure that they‘ve done a great job. And we need to make sure they‘re able to continue to do a great job. They are much closer to the customer than a lot of these big guys are, and they need to be a part of the solution, too. I think Secretary Geithner understands that and agrees with that.

MADDOW: Congratulations on being the first person to identify a non-bad guy in the whole debate over the banking system. Senator Tester, thank you so much. I really appreciate it.

TESTER: Thank you, Rachel.

MADDOW: Senator Jon Tester is from Montana. He‘s a member of the Senate Banking Committee.

Now, last night, President Obama made it clear that improving relations with Iran will be the—near the top of his foreign policy agenda. Today, did you see that Iran responded? And they had a giant parade with tons of missiles? Yes, that was awkward.

Later this hour, we will be joined by someone who has been there and done that when it comes to Iran. We will be joined by President Jimmy Carter.

(COMMERCIAL BREAK)

MADDOW: Coming up, in just a moment on this show, former President Jimmy Carter. Yes, I‘m nervous. Thank you for asking.

First, though, it‘s time for a couple of holy mackerel stories in today‘s news. Prisoners are the only Americans who have a constitutional right to health care—which is awkward, I know. I wrote my whole doctoral dissertation on how awkward that is. But it is the truth.

When we, as a society, elect to lock someone up, we take away their ability to fend for themselves in the world. So, the responsibility that comes with our claimed right to incarcerate someone is that we feed them and clothe them and protect them from harm and provide them health care. Otherwise, it is cruel and unusual punishment, to which the founding fathers famously said, “No.”

Prisoners‘ right to health care has given rise to a really dramatic federal court action in California that could result in nearly 60,000 prisoners being freed who otherwise wouldn‘t be. Three federal judges have notified the state that they are about to rule that California‘s crowbar hotels are so overcrowded that it‘s become impossible to provide the minimal level of health care that the Constitution requires.

Among those who testified to that is the former head of the corrections department in the state. If the health care can‘t be improved, if the state cannot figure out how to reduce the crowding, then the Constitution says that something‘s got to give. So now, maybe, the state will be forced to spring 57,000 prisoners over the next two to three years who wouldn‘t otherwise have been sprung.

How bad is the overcrowding that it might cause a drastic remedy like that? Well, here‘s the figures: California now has 33 adult prisons. They have about 160,000 people stuffed into them. I say “stuffed into” because those prisons are currently holding about twice as many people as they were designed to hold. There are bunk beds stacked three high in gymnasiums.

The judge‘s ruling would force the prisons down from 200 percent capacity to something like 120 percent capacity. So, the bad news is that there will still be 20 percent more people stuffed into California prisons than the prisons were designed to hold. The good news is, that they are so overcrowded right now, that would actually be a huge improvement.

And how about a cocktail? A presidential or vice presidential cocktail? After eight years of a tee-totaling president who had to go to bed at 9:00, it‘s been quite a change of pace to report on a new first couple who regularly stay up past midnight, who have hosted a half dozen gatherings at the White House already in their first three weeks living there and who host actual cocktail parties, presumably, including actual cocktails.

We have two new developments on the presidential libations beat to report for you now. Number one, Joe and Jill Biden are getting in on the booze news with “TheHill.com” reporting today that the vice president and his wife will host a - yes, cocktail reception for all 15 new members of the United States Senate.

Aren‘t you kind of dying to know what Roland Burris‘ drink of choice is? There‘s a great drink called “the last word.” That would be so poetic for him.

Anyway, in addition to the Biden cocktail party news, there is also a report at “Politico.com” today which says the Obamas hope to make a regular tradition, like a weekly tradition, of these Wednesday night cocktail parties that they have been hosting already.

OK, if this is going to be a regular Wednesday night thing, it is time for me to reiterate our standing plea for information. Anyone who can hook me up with the White House cocktail list, or who can at least tell me if they are considering developing a house cocktail, earns a round on me - rachel@msnbc.com. Come on!

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARACK OBAMA, UNITED STATES PRESIDENT: My national security team is currently reviewing our existing Iran policy, looking at areas where we can have constructive dialogue, where we can directly engage with them.

(END VIDEO CLIP)

MADDOW: Welcome back, diplomacy. That was President Obama last night reiterating his intention to talk with Iran, a policy position that ignited some of the most controversial moments of the presidential campaign.

Just hours after our president spoke, Iran‘s President Mahmoud Ahmadinejad responded at a big rally marking the 30th anniversary of the Iranian revolution which toppled the u.s.-backed shah and brought hard-line Muslim clerics to power.

Ahmadinejad described his nation as a, quote, “superpower.” And he said, quote, “The Iranian nation is ready for talks with the U.S. but in a fair atmosphere with mutual respect.”

Easy to say when you are speaking at a rally that includes a parade with tons of missiles in it. That said, seeking mutual respect among unfriendly nations and being attacked and demonized for it is something that my next guest knows first hand.

Former president Jimmy Carter has spent a lifetime seeking peace in the Middle East and he has the political scars to show for it. And he also has a record of success to show for it.

In September 1978, he managed to bring the leaders of Egypt and Israel to Camp David. After nearly two weeks, the two sides agreed to terms on a peace deal, an unlikely peace deal that persists 30 years later.

The Camp David peace accords were signed at the White House. The two leaders shook hands on the White House lawn. And over this historic footage, a lot of people who make bets on politics lost a lot of money.

When the Camp David accords were signed, I was five years old. Lots of younger Americans are familiar with President Carter, mostly because he won the Nobel Peace Prize in 2002 and because of his post-presidency work monitoring elections and building homes.

But you know what he‘s doing right now? He‘s giving the new administration a detailed plan for how to make Israel and the Palestinians come to an agreement. He is still accruing political scars for trying to make this work.

But if a guy can make this happen, you probably shouldn‘t bet against his prospects for pulling this off.

Joining us now is the 39th president of the United States, Jimmy Carter. His latest book is “We Can Have Peace in the Holy Land: A Plan That Will Work.” President Carter, thank you so much for coming on the show tonight.

JIMMY CARTER, FORMER UNITED STATES PRESIDENT: Thanks. I‘m delighted and so is all of my family.

MADDOW: Oh, very nice. Thank you for saying so. We are awaiting Israel‘s election results now. I have to ask you if you think one outcome versus another will be better for the prospects of peace.

CARTER: I don‘t think it really makes much difference who is elected tonight as getting the most both in the Knesset or the parliament. But putting the next government together will be a long and tortuous thing that will take several weeks. Now, we don‘t know how it will come out.

But I think the main fact is that this is - despite all of the bad news coming out of the middle East, it‘s still a good time to plan for progress, good progress and maybe a complete success, as I have spelled out in my book.

There are several reasons for that. One is we have a new president now who has put Mid-east peace process at the top of his agenda and promised me personally and promised the public that he would start working on it the first day of his term, and did that.

And secondly, he‘s appointed a superb mediator or special envoy for peace. And that‘s - as you know, former senator from Maine, George Mitchell. And those two things together means that the United States in the future will play a strong role.

And when he‘s through with the stimulus package and turns to more pleasant things, I hope that those pleasant things will have peace in the Middle East at the top of his agenda.

MADDOW: In this book you make the case that America has a lot of things on its side in terms of pursuing this opportunity for Mid-east peace. But you also described a window of opportunity that may close, a window of opportunity that won‘t necessarily last long.

Why do you see there‘s time pressure now? Why might the opportunity go away?

CARTER: Well, there are several reasons. One is that I think a lot of Israelis at the top of the leadership list now see that what Israel is doing so far by taking over almost all of the west bank leaves the Palestinians without any prospect for a second nation between the Jordan River and the Mediterranean Sea.

And a move toward a one nation or one state solution is a catastrophe, not only for the Palestinians and other neighbors but also for the Israelis because there are already a majority of non-Jews in that one nation arena. And Israel‘s only option would be to deprive their citizens, if it is one nation, of a right to vote or try to expel them from the area. And neither of those two things are acceptable.

If they are given the right to vote, in just a few years, the Palestinians or the Arabs will have a majority vote in the one nation and this would also be a catastrophe for what Israelis define as a Jewish state.

So that means that the two-nation solution is the only one. And I spell out in the book the details of what can be done to make the two-nation solution very acceptable to both sides. And I don‘t have any doubt it would appeal to a vast majority of Israelis and Palestinians as well as their neighbors.

MADDOW: Is this a situation in which all of the major stakeholders agree on where the path ends?

CARTER: Yes.

MADDOW: Everybody agrees on what the ultimate solution is going to be here. It‘s just a matter of finding your way over the eggshells, of dealing with the political process of getting everybody to the same conclusion?

CARTER: It‘s just a matter of nuances, yes. The basic solution that‘s spelled out in the official U.S. policy, in the roadmap plan of the so-called international quartet in a unanimous vote repetitively, by the older Arab nations on earth, all 22 of them, and approved by the majority of both Israelis and Palestinians is for Israel to withdraw from the basic occupation of the west bank.

My own proposal in this book is that they not withdraw completely but leave the Israelis in charge of enough Palestinian land near Jerusalem to house about half of a total Israeli settlers now in Palestine. And in exchange for that acre by acre to swap the Palestinians enough land, perhaps to build a corridor between the west bank and Gaza, which is about 35 miles.

By the way, Ariel Sharon, a very conservative prime minister, agreed with me completely on that back in January 2005 when I last talked to him. So that‘s a basic swap.

The other very difficult thing, which the prime minister of Israel has properly endorsed is a sharing of Jerusalem. And that could be spelled out in complex but pretty well defined in terms already negotiated.

And the third thing is the return of Palestinians. They have that right guaranteed under International Law. But I don‘t think it‘s possible for a massive number of Palestinians to return to Israel. They can return to the west bank and Gaza, and those that don‘t have a chance to return, then they can be compensated monetarily for the loss of their property.

MADDOW: Mr. President, I have one question for you about Iran.

CARTER: OK.

MADDOW: You have described the period of the Iranian hostage crisis as the most difficult period of your life.

CARTER: Yes.

MADDOW: When you think about what the U.S. symbolizes in Iranian politics, the way that Iranians think about us, do you worry about the prospects for direct negotiations, direct diplomacy between our new government and their government?

CARTER: No. No, I don‘t. There are four things that we ought to do about Iran now. First of all, withdraw from Iraq because that invasion of Iraq, which is totally unwarranted, is a major cause for Iran to have its influence in the region greatly escalated.

Secondly is to do something about the plight of the Palestinians. Because in the absence of that, Iran has now emerged unnecessarily, I think, in an unwarranted way, as the champion of the Palestinian cause. The third way is to stop threatening to attack Iran even with nuclear weapons, which some in the Bush administration have done at least indirectly. And those things can be helpful.

And the fourth thing is to have communications with Iran so we can work out with Iranians, with mutual respect, I might say, an alleviation of their fear and paranoia and, hopefully find - I can‘t guarantee this, of course - that they will abandon their plans to move towards a nuclear weapon.

MADDOW: President Jimmy Carter, winner of the Nobel Peace Prize, author of “We Can Have Peace in the Holy Land: A Plan That Will Work.” It‘s a real honor to have you on the show tonight, Sir. Thank you so much for your time.

CARTER: It‘s been a pleasure. Thank you.

MADDOW: Coming up, is President Obama hiding behind state secret claims the way the Bush administration did? Are they - really? Waiter, where‘s my change?

I will talk with ACLU attorney Ben Wizner. And we will do a very special “RACHEL MADDOW SHOW” melodramatic reenactment for which, again, I apologize in advance.

(COMMERCIAL BREAK)

MADDOW: And now it is time for another installment in our thankfully very infrequent series, the RACHEL MADDOW SHOW melodramatic re-enactment. First the setting. The Ninth Circuit Federal Court of Appeals in San Francisco. The occasion, a case involving the alleged transport and torture of five terrorism suspects who were picked up as part of the CIA‘s extraordinary rendition program.

The context here, the Bush administration‘s Justice Department getting the case dismissed last year using one of Mr. Bush‘s favorite tactics, claiming state secrets. They made the argument that even talking about this case in court, even with sensitive information excluded, would jeopardize national security.

Good thing there‘s a new president in office, right, with a new Department of Justice in place for when those five prisoners appeal that dismissal, right? Right? Because there‘s no way that the Obama administration would repeat the blanket state secrecy invocation, right? Right?

Let‘s take a look at what was actually said by the lawyer and a judge in the San Francisco courtroom yesterday. We now join the hearing already fake in progress.

(BEGIN VIDEO CLIP)

KENT JONES, POP CULTURIST (on camera): May it please the court. I‘m Douglas Letter for the United States Department of Justice, which has intervened in this case to urge affirmance.

MADDOW (on camera): When was the district court decision?

JONES: Hmm, about a year ago, February.

MADDOW: About a year ago? Yes. Is there anything material that has happened since that decision in terms of historical stage that has any bearing here?

JONES: No, your honor. No.

MADDOW: The change of administration has no bearing?

JONES: No, your honor.

MADDOW: The government‘s position is the same?

JONES: Exactly, your honor. The positions that I‘m arguing have been thoroughly vetted with the appropriate officials within the new administration and these are the authorized positions.

MADDOW: So you represent that you are conveying the views of the present Justice Department?

JONES: Exactly, your honor. Absolutely. Absolutely.

(END VIDEO CLIP)

MADDOW: That scene is probably the closest we will ever get to seeing a federal judge, or at least a fake federal judge, doing a spit take.

Like most people who were conscious during the last election cycle, Judge Schroeder probably assumed that the person who spent the better part of two years campaigning against Bush-era secrecy and Bush-era detention, interrogation and torture policies, the man who is now president, Barack Obama, would not go use the exact same state secrets defense that the Bush administration used as a blanket shield from accountability.

A defense that means the government can do whatever it wants. It can break the law. It can avoid accountability by hiding behind state secrets. This provision intended to protect individual classified documents, but ballooned and mass-produced by the Bush administration to get entire cases preemptively dismissed.

Did that really just happen like we think it did? Or did Kent and I make it seem way worse than it really was?

Joining us now is Ben Wizner, the ACLU attorney who argued on behalf of the five plaintiffs and against the Obama Justice Department, and who will hopefully forgive me and Kent for acting out that hearing like idiots. Mr. Wizner, it‘s nice to meet you. Thank you for coming in.

BEN WIZNER, ACLU ATTORNEY: Thanks for having me and thank you also for not having somebody play me in the reenactment. I appreciate it.

MADDOW: We thought about it.

WIZNER: Yes.

MADDOW: And we realized you‘re going to be here in person. You might be mad.

Let‘s understand the context. Who are your five clients and why did you take this case?

WIZNER: These are five foreign citizens who were abducted off the streets of various countries, who had their clothes sliced off by CIA black renditions teams. These are people dressed like ninjas head to toe, who were chained to the floor of airplanes, dressed in diapers and flown to dungeons literally around the world.

Some of these were CIA black sites that were operated by our government. Some of them were prisons in countries like Egypt and Iraq that are absolutely notorious for their torture. And these flights were facilitated and organized by a private corporation that we sued in this lawsuit.

This isn‘t the first time that we‘ve tried to bring the administration into court on behalf rendition victims. We brought a lawsuit earlier on behalf of an innocent German citizen named Khalid al-Masri that was similarly thrown out on these bogus state secrets grounds.

We were hoping on Monday to have a different kind of experience with a new administration. But as you saw and as you reenacted, this is just a kinder and gentler version of “trust us.”

MADDOW: I know that the arguments in this case, the briefs had been fully prepared by the time that the Obama administration walked in the door here. All that was left to them was to do the oral arguments here. But did Obama really just take this and run with it? Did they have another option here? Couldn‘t they even just have asked for more time to come up with a different plan?

WIZNER: That would have been the obvious thing for them to do.

Remember, this is a motion to dismiss filed by the Bush administration. The basis for this motion to dismiss our lawsuit was a declaration filed by Michael Hayden, the current head of the CIA for maybe a few more days. I don‘t know how much longer.

And that declaration says that the CIA‘s detention and interrogation program is one of most vital tools in our war against terrorists. That if we let this case go forward, it will reveal classified interrogation techniques that will train enemies on how to resist it.

But on January 22nd, the actual president of the United States essentially ended that program. He banned those techniques. He closed the CIA prisons. He said that from now on, we‘re going to comply with our treaties that prevent transfer of prisoners to countries that exercise torture.

And so the question was, what is the Justice Department doing defending a declaration like that?

MADDOW: Right.

WIZNER: And why are they standing in the way of accountability? And I do want to say here that there is no moral equivalent between the two administrations. You know, we have the benefit no longer to have our country run by war criminals.

And it is terribly significant that the administration ended so-called enhanced interrogation. It‘s shutting down Guantanamo and the extraordinary rendition program. Where we differ is on another critical issue and that‘s the question of accountability.

And I think that this administration would prefer to sweep the last seven years under the rug and move on and get along. The problem is not a single torture victim, and there are hundreds, has yet had his day in court.

And you did a segment on prosecution - I understand that‘s a controversial issue. The other side of the coin is civil liability. And if torture victims aren‘t going to be able to go into court at all - and bear in mind these victims can‘t go into court. I don‘t know which victims will be able to go into court.

Then, really, you‘ll have an immunity regime for the perpetrators, for the violators and it will be impossible really to enforce the prohibitions that are in those executive orders and in our laws.

MADDOW: This is really important stuff. Ben Wizner, attorney with the ACLU National Security Project, who argued for these five plaintiffs in yesterday‘s hearing. I hope that we helped get the word out about this. It seems incredibly important to me. Thank you for working on the case.

Thanks for joining us.

WIZNER: Thanks for having me on, Rachel.

MADDOW: Coming up on “COUNTDOWN,” Keith talks to the single most enthusiastic person at Barack Obama‘s town hall today in Florida, a young man working at McDonald‘s while he studies to be a DJ - a broadcaster.

Next on this show, I will get just enough pop culture from my friend, Kent Jones who went to New York Comic-Con over the weekend, which explains the loud Super Mario soundtrack in the cubicles all day today.

(COMMERCIAL BREAK)

MADDOW: Now, it‘s time for “Just Enough” with my friend, Kent Jones.

Hi, Kent. What have you got?

JONES: Good evening, Judge Maddow.

MADDOW: Nice (UNINTELLIGIBLE).

JONES: Well, thanks. Over the weekend, I went to the New York Comic-Con, the huge comic book and fantasy convention they have every year. It was fantastic but the economy was on everyone‘s mind. So I asked which super hero or fictional character do we need right now to help fix things. Check it out.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Spiderman.

JONES: How come?

UNIDENTIFIED MALE: Well, you‘ve got to consider Spiderman is a normal person just like everyone else. And he‘s dealing with the same financial stuff. He‘s got the best insight on it. All of the rest of the superheroes got some super power to keep them money-full.

UNIDENTIFIED FEMALE: Maybe Wonder Woman, because she‘s very empowering. And she seems to work for the good of the people. And she‘s a female and I think figures in our world are very important.

UNIDENTIFIED MALE: I would say Robin Hood. He steals from the rich and gives to the poor. And frankly, he can get to the middle class as well.

UNIDENTIFIED FEMALE: Probably the Flash.

JONES: That‘s a good answer. How come?

UNIDENTIFIED FEMALE: Well, you know, he can do things super fast, and probably help out with everybody in an orderly time. And we‘ll still have time to do what we have to do.

UNIDENTIFIED MALE: Tony Stark - Iron Man.

JONES: OK. Why?

UNIDENTIFIED MALE: Because I hear the Hulk is really good in math and Iron Man is more of a business guy.

UNIDENTIFIED MALE: I think the Black Panther, because he‘s powerful black man of principle like the man we have in the office right now.

UNIDENTIFIED MALE: I pick Harvey Dent. I believe he can clean up the streets the way Gotham - it‘s supposed to make it clean and worth living in.

UNIDENTIFIED MALE: I don‘t think I would pick a superhero. I think I‘d pick a super-villain, someone like Lex Luthor, someone who could put everything under one umbrella, control all the world‘s economy, and dole it out to everybody as needed.

UNIDENTIFIED FEMALE: Stephen Colbert. He was in Marvel Comics.

UNIDENTIFIED FEMALE: No one can really fix the world per se, but they can help out and I think everyone could be a superhero.

(END VIDEO CLIP)

JONES: See, that‘s the one I want.

MADDOW: Yes.

JONES: Right here.

MADDOW: I wouldn‘t have expected - I guess I had hair prejudice. I didn‘t expect the super-inspirational thing ...

JONES: Absolutely not.

MADDOW: ... from the most fascinating hairdo.

JONES: I got real answers from all of them and they are right.

MADDOW: Seriously.

JONES: Tony Stark - yes.

MADDOW: Yes. You know, the Lex Luthor being a super-villain who‘s evil enough to dole everything out to everyone. I‘m not sure what he‘ll do with all of the rest of it, absolutely.

JONES: Yes. And that‘s unlikely.

MADDOW: Well done, Kent.

JONES: Thank you.

MADDOW: Thank you for watching tonight. We will see you here tomorrow night. “COUNTDOWN” with Mr. Keith Olbermann starts right now. Good night.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.